As lawmakers head into state budget negotiations, a spotlight on key differences

House passes budget changes Thursday, shoot down several last-minute changes from Democrats

Members of the House of Representatives talk before a press conference to discuss their proposed budget on Thursday

RALEIGH — After a day-long debate, the N.C. House passed its version of the $22.9 billion state budget in an 82-34 vote late Thursday night. Republicans praised the economic success the state has experienced under conservative leadership since 2011, while Democrats’ attempts to make significant last-minute changes were silenced on the House floor.

Per standard procedure, Senate leaders will opt to move the budget into closed-door conference negotiations rather than accepting the changes. Both chambers are expected to name their head budget negotiators early next week.

“House Republicans heard the calls for change, and responded by enacting commonsense reforms to unleash North Carolina’s businesses and citizens to work hard, save for their future, and invest in the next generation,” said House Majority Leader John Bell (R-Wayne). House Speaker Tim Moore (R-Cleveland) indicated that this year’s budget is in line with past spending goals. “The 2017 House budget provides more income tax relief for North Carolina families, seeks a top-quality return on investment for their hard-earned dollars and saves for the future while making strategic investments in North Carolina’s rapidly growing population,” said Moore.

During second reading debate which ran from about 2 p.m. to 10:30 p.m. on Thursday, Democratic leaders filed several amendments in attempt to make final changes to the document before it moved to conference, a process that the minority party has limited involvement in. Rep. Mickey Michaux (D-Durham) filed an amendment to increase the cost-of-living allowance for state retirees by an annual 2 percent. The House budget includes a one-time 1.6 percent increase for retirees. Moore asked the body to table the amendment, meaning that legislators could vote to dismiss the request rather than voting on the merits of the proposed change and without a full debate on the issue. Once an issue is “tabled” a similar amendment cannot be brought forward. Several other Democrat amendments were tabled over the course of the day, including Rep. Pricey Harrison’s attempt to revitalize the Jordan Lake Rules and two separate attempts to defund the Opportunity Scholarships program that awards low-income students vouchers to attend private school.

Minority Leader Darren Jackson (D-Wake) challenged the body’s authority to utilize the motion to lay an amendment on the table on the grounds that all motions had to be submitted in writing. After Moore dismissed the challenge, Republicans indicated the procedure was being utilized to help move the debate along. In the past, budget nights have stretched into the early hours of the following day. In 2015, for instance, one House session adjourned around 5:30 a.m.

In the end, the proposal passed with the support of 12 Democrats, including Rep. Becky Carney of Charlotte, Rep. Ed Hanes of Winston-Salem, and Rep. Yvonne Holley of Raleigh. The House adjourned around 1 a.m. Friday.

Budget conferees could begin negotiations as soon as next week.

The legislature is expected to remain in session until Gov. Roy Cooper makes his final decision on the budget. Insiders say that Republican lawmakers are more than prepared to exercise their veto override power should the Democrat governor nix their final appropriations plan.

TAXES

The House budget increases the standard deduction by $1,000 for married filing jointly taxpayers and surviving spouses, by $800 for heads of household, and by $500 for single and married filing separately taxpayers in 2018. The Senate proposal is a bit more generous, aiming to cut nearly $1 billion in taxes by 2019, including raising the deduction by $2,500 for married filing jointly, $1,000 for heads of household, and $1,250 for single and married filing separately, over the course of two years.

House leaders opted not to lower the personal income tax, which the Senate would like to see move from 5.499 percent to 5.35 percent effective Jan. 1, 2018. For more on differences in the two state finance packages, click here. Rep. Chris Millis (R-Onslow) said he looks forward to a better final product out of conference, “where all the work gets done.”

Millis hopes to see the House move toward additional tax cuts and avoid pork spending that often makes its way into later negotiations. “Historically, the Senate will pass an optically clean budget for the most part, and then the House will have a little more of a looser budget on some things,” said Millis. “If we’re serious about having a clean budget and getting all this settled in a reasonable time frame, then that conference process needs to be very respectful of what is spending in the role of government and what is not.”

TEACHER PAY

Aligning with past years, House and Senate leaders differ in their approaches to education spending and teacher pay, which is sure to be a major topic at the negotiating table.

Under the House plan, all teachers would receive some sort of pay increase. Mid-level teachers would see the most consistent benefits, with some raises as high as 6.7 percent. Educators at the beginning and end of their career would see a $300 increase in base salary, but veteran teachers would also receive an additional incentive. Teachers with more than 27 years of experience are offered a $5,000 bonus if they make a commitment to remain in the classroom for an additional two years. “What we were looking at was retention numbers … we saw some hot spots,” Rep. Jeff Elmore, an art teacher from Wilkes County, told reporters at a press conference earlier in the week. “When you put higher salaries at the end of the scale, the teacher has the ability to retire – and that would affect their retirement benefits,” Elmore said when addressing the choice to make the veteran increase a bonus rather than a solid raise. “We need that experience in the classroom, we want them to stay. We don’t want to create an incentive for them to immediately walk out the door.”

Senators, on the other hand, have decided to hold off on pay bumps for beginner and veteran teachers, opting instead to invest in mid-career employees this cycle. Under their plan, teachers would receive with an average raise of 3.7 percent this year, with employees between 9 and 14 years of experience seeing the largest bump at 4.8 percent.

Following the passage of their proposal, Senate Deputy Communications Director Shelly Carver sent out a comparison chart (Figure 1) of teacher salaries from 2013 to present in order to demonstrate the incremental changes conservatives have made to incentivize and retain teaching professionals over the years. In some cases, teachers have seen up to a 35 percent increase in their pay since the 2013-14 school year.

EDUCATION

Both the House and Senate plans fully fund K-12, community college and university enrollment growth. And while both budgets allocate additional money to help create new pre-K slots, the House version aims to completely eliminate the waiting list by this year. The Senate has described its plan as a way to cut the waiting list “in half”. Each plan allocates close to $10 million in additional funding for textbooks and digital learning tools for the classroom, and seek to reinstate the N.C. Teaching Fellows Program which awards some loan forgiveness to teachers that agree to serve in a low-performing public school. Both budgets give funding to State Superintendent Mark Johnson to hire his own staff, following the Board of Education law changes in December. The House accounts for 10 new hires, while the Senate allocates for five.

STATE EMPLOYEES

The House budget would provide a $2,000 pay increase for all state employees, which includes correctional officers and state troopers, over the next two years, as well as five bonus leave days. State retirees would see a one-time, 1.6 percent increase in their payments this year. The Senate does not include either of these provisions.

HEALTH & HUMAN SERVICES

The House did not include a policy change to the Supplemental Nutrition Assistance Program (SNAP) that the Senate spearheaded in an attempt to reform eligibility for the federal program. While the change does not affect state funds, Senators targeted a “loophole” that allows some citizens who would not normally meet the program’s income requirements to utilize food stamps if they already qualify for other government assistance programs, such as disability insurance. The Senate is also seeking to expand opioid treatment and education programs, something the House budget supports only in part.

HURRICANE MATTHEW & RAINY-DAY FUNDS

Lawmakers have praised their own prudent budgeting in the wake of the economic devastation that followed Hurricane Matthew in October, and major contributions to the state reserve are seen again this budget cycle. However, differences of whether to save or spend $100 million may be a cornerstone of budget negotiations. The Senate would like to add $363 million to the state’s rainy-day fund, while the House seeks a smaller deposit of $263 million. Both the House and Senate set aside $150 million in disaster relief assistance to victims of Hurricane Matthew which, in addition to the first disaster relief act, will total $350 million in state funds. “The bottom line is that our budget supports successful government investment strategies that have contributed to revenue surpluses, increased rainy day reserves, and continued economic growth,” Rep. David Lewis (R-Harnett), House Rules chairman said.

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